The healthcare industry has been the beneficiary of immense investor attention because extensive vaccination drives are helping some of the major economies reopen sooner than expected. This is evidenced by the Vanguard Health Care Index Fund ETF Shares’ (VHT) 6.4% gains over the past month compared to the SPDR S&P 500 Trust ETF’s (SPY) 3.2% returns.
Considering current market volatility, which is partly due to higher-than-expected inflation projected by the Federal Reserve, investor’s interest in the healthcare sector is expected to grow further because it is considered relatively stable in terms of performance given the largely inelastic demand for healthcare products. Furthermore , governments worldwide are spending billions to improve the healthcare industry, and companies in this space are innovating quickly to address the growing healthcare needs of an aging population.
With these factors in mind, we think it could be wise to bet on the shares of quality healthcare companies Hologic, Inc. (HOLX), Owens & Minor, Inc. (OMI), and Amneal Pharmaceuticals, Inc. (AMRX). These names look undervalued at their current price levels.
Hologic, Inc. (HOLX)
HOLX develops, manufactures, and supplies diagnostics products, medical imaging systems, and surgical products for women’s health through early detection and treatment. It operates through four segments: Diagnostics, Breast Health, GYN Surgical, and Skeletal Health. The company provides Aptima SARS-CoV-2 and Panther Fusion SARS-CoV-2 assays for the detection of SARS-CoV-2. HOLX is based in Bedford, Mass.
On June 17, 2021, HOLX completed its acquisition of Mobidiag Oy, which is an innovator in near-patient, acute care molecular diagnostic testing. Jan Verstreken, HOLX’s group president, said, “Closing the acquisition of Mobidiag enables us to become a broader, more diversified global diagnostics leader.”
The company’s revenue surged 103.4% year-over-year to $1.54 billion for its fiscal second quarter ended March 27, 2021. Its non-GAAP gross profit grew 150.1% year-over-year to $1.15 billion. Its non-GAAP net income came in at $673.2 million, which represents a 348.8% year-over-year increase. HOLX’s non-GAAP EPS came in at $2.59, up 354.4% year-over-year.
In terms of forward non-GAAP P/E, HOLX’s 8.79x is 64.3% lower than the 24.59x industry average. In terms of forward EV/EBIT, the stock’s 7.33x is 65.1% lower than the 21x industry average.
For its fiscal year 2021, analysts expect HOLX’s EPS and revenue to increase 91.2% and 38.2%, respectively, year-over-year to $7.61 and $5.22 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 22.5% over the past year to close yesterday’s trading session at $69.64.
HOLX’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. It has an A grade for Growth and Value, and a B grade for Quality.
Owens & Minor, Inc. (OMI)
OMI in Mechanicsville, Va., is a healthcare solutions company. It operates through two segments: Global Solutions, which offers a portfolio of products and services to healthcare providers and manufacturers, and the Global Products, which manufactures and sources medical surgical products for the prevention of healthcare-associated infections across the acute and alternate site channels.
On June 30, the company announced a new pilot program in collaboration with Penske Logistics and Penske Truck Leasing that uses an electric semi-truck to deliver large-scale medical products and PPE to hospitals in Southern California.
OMI’s revenue increased 10% year-over-year to $2.33 billion for its fiscal first quarter ended May 5, 2021. Its non-GAAP operating income grew 493.8% year-over-year to $162.70 million. Its non-GAAP net income increased 4,545.8% year-over-year to $111.50 million. And the company’s non-GAAP EPS increased 3,825% year-over-year to $1.57.
In terms of forward P/S, OMI’s 0.32x is 96.1% lower than the 8.22x industry average. The stock’s 0.43x forward EV/S is 94% lower than the 7.18x industry average.
The company’s EPS is expected to increase 75.7% year-over-year to $3.97 in its fiscal year 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters. OMI’s revenue is expected to be $2.50 billion for the quarter ending September 30, 2021, which represents a 20.5% year-over-year rise. The stock has soared 451.3% over the past year to close yesterday’s trading session at $41.68.
OMI’s POWR Ratings reflect this promising outlook. The company has an overall B, which translates to Buy in our proprietary ratings system.
The stock has an A grade for Growth and Value. Within the Medical – Devices & Equipment industry, OMI is ranked #62. To see OMI’s ratings for Sentiment, Momentum, Stability, and Quality as well, click here.
Amneal Pharmaceuticals, Inc. (AMRX)
AMRX develops, licenses, manufactures, markets, and distributes generic and specialty pharmaceutical products for various dosage forms and therapeutic areas. The company operates in three segments: Generics, Specialty, and AvKARE. AMRX is based in Hayward, Calif.
AMRX announced on June 17, 2021, that the U.S. Food and Drug Administration (FDA) had agreed to review AMRX’s Biologics License Application (BLA) for Bevacizumab. Chirag and Chintu Patel, the company’s Co-Chief Executive Officers said, “The FDA’s acceptance of our BLA for Bevacizumab is a significant milestone in our journey to become an important player in biosimilars.”
The company’s gross profit increased 10% year-over-year to $191.56 million for its fiscal first quarter, ended March 31, 2021. Its income before taxes grew 11.7% year-over-year to $14.90 million. And its non-GAAP net income came in at $61.06 million compared to $60.33 million in the prior-year period. Its non-GAAP EPS was $0.20 compared to $0.20 in the year-ago period.
In terms of forward P/S ratio, AMRX’s 0.36x is 96.1% lower than the 8.22x industry average. In terms of forward EV/S, the stock’s 1.57x is 78.1% lower than the 7.18x industry average.
Analysts expect AMRX’s EPS to increase 28.6% year-over-year to $0.81 in its fiscal year 2021. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to be $542.45 million for the quarter ending September 30, 2021, which represents a 12.5% year-over-year rise. The stock has soared 12% over the past nine months to close yesterday’s trading session at $4.92.
It’s no surprise that AMRX has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value, and a B grade for Growth.
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HOLX shares fell $1.58 (-2.27%) in premarket trading Thursday. Year-to-date, HOLX has declined -6.55%, versus a 15.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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